The Future Sino-US Financial Coupling or Decoupling Accompanied by Their Fierce Rivalry with Different National Approaches

René W.H. Linden () and Piotr Łasak ()
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René W.H. Linden: The Hague University of Applied Sciences
Piotr Łasak: Jagiellonian University

Chapter Chapter 10 in Financial Interdependence, Digitalization and Technological Rivalries, 2023, pp 119-128 from Springer

Abstract: Abstract Over time, the financial rivalry between China and the US has become increasingly important. As of 2018, the US has started a trade war that eventually also led to a tech war that resulted in financial decoupling. Competition can concern both international dimension as well as the functioning of internal financial markets in China and the US. The bilateral financial relations between those countries, however, are characterized by a big dichotomy. Despite the processes of financial decoupling the Chinese financial markets are very attractive for Western investors due to their size and fast growth, relatively high bond yields initially, and the largely uncorrelated assets which enable more diversification possibilities of the asset portfolio. The current policy implemented by the Chinese government regarding access to the financial markets is also more open. On the one hand, there is a deepening of a process of financial liberalization, but on the other hand, the Chinese state policy and far-reaching interventionism still plays a significant role in the financial couplingfinancial coupling with the US economy. Both US and Chinese financial regulators are especially aware of cybersecurity and are taking action on significant data flows behind which lies an increasingly hidden geopolitical competition between Beijing and Washington. There have been several US initiatives to decouple the financial services sector from China, which may be possible in the short term but unlikely in the long term as total financial decoupling is much more complex than technological decoupling. Due to the strong integration of the Chinese and US financial markets and the costs and limits of financial and physical capital, especially for technology, constructive financial cooperation between China and the US is essential to maintain the existing international monetary system. The liberalization of China's financial markets creates great potential for China and its plans for financial internationalization. It is likely that the opening of China's financial markets will lead to market expansion with a positive impact on the entire real economy.

Keywords: Constructive financial cooperation; Technological competition; Tech war; Trade war; International monetary system; Cross-border payments; Slowbalization; Dichotomy; Geopolitical competition (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-27845-7_10

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